Ahmedabad New Cotton Mills Co. Ltd. Vs. Asstt. Commissioner of Central Excise - Court Judgment

Excerpt:
- - the bank guarantee is given under the orders of the supreme court and the petitioner has failed in the supreme court and, therefore, the bank guarantee has become enforceable. relying on this, it is submitted that the excise department has failed to consider the waiver of the claim and, therefore, the enforcement of the bank guarantee cannot be made.order1. the petitioner-company challenges enforcement of the bank guarantee by the excise department. the bank guarantee is given under the orders of the supreme court and the petitioner has failed in the supreme court and, therefore, the bank guarantee has become enforceable. 2. the contention raised by the petitioner is that since the petitioner is a sick company and there is a scheme sanctioned under the sick industrial companies (special provisions) act, 1985, the coercive recovery of excise duty cannot be made except with the permission of the bifr. 3. it is also submitted that under the sanction scheme, the concerned agency of the government of india has agreed (inter alia) to waive the disputed excise duty liability of rs. 4 lacs. also to consider the withdrawal of the case pending against excise duty refund of rs. 92 lacs with contingent interest of rs. 166.15 lacs as on march 31, 1995 and waive the claim. relying on this, it is submitted that the excise department has failed to consider the waiver of the claim and, therefore, the enforcement of the bank guarantee cannot be made. 4. it is submitted that the petitioner had filed a suit for refund of the payment of excise duty. the suit was decreed. in the high court, the first appeal filed by the union of india and the excise authorities was allowed. however, during the pendency of the appeal, the department was made to deposit the amount and the petitioner-company was permitted to have that amount on furnishing the bank guarantee. in the high court, the excise authorities had succeeded and the petitioner had carried the matter to the supreme court and it is stated that, under the orders of the supreme court, the bank guarantee has been continued. now the supreme court has also dismissed the appeal of the petitioner and confirmed the judgment of the high court and, therefore, the excise department is enforcing the bank guarantee to recover the amounts paid under the orders of the court and subject to the furnishing of bank guarantee. 5. the contention of the petitioner that since the petitioner is a sick unit working under a scheme sanctioned the bifr under the sick industrial companies (special revisions) act, this recovery cannot be enforced. it is to be noted that the recovery is being effected from the bank by enforcing the bank guarantee and, therefore, it cannot be said that enforcement of bank guarantee is in any manner stayed or prevented by the provisions of section 22 of the sica. the relationship between the excise department and the bank is separate from that of the petitioner-company and the liability of the bank cannot be said to have been stayed merely because the debtor company is a sick unit and is protected under the umbrella of section 22 of the act. 6. under clause (xiv) of the scheme, until the excise department waives the claim, that liability is very much alive and enforceable and the enforcement of bank guarantee cannot be stayed on the ground that the question of waiver is not considered. the scheme was sanctioned on 16th october, 1996 and the judgment of the supreme court in the unjust enrichment case [mafatlal industries ltd. v. union of india, 1997 (89) e.l.t. 247] is delivered on 19th december, 1996. in view of the fact that the bank guarantee has been given in pursuance of an interim order of the supreme court and that the parties have to abide by the final orders of the supreme court, the excise department cannot be now prevented from enforcing the bank guarantee, which has been executed in pursuance of the orders of the supreme court and is being enforced in terms of the supreme court orders. 7. the learned counsel for the petitioner has also drawn our attention to the mandate of provisions of section 18(8) of the sica, which reads as follows :- '(8) on and from the date of the coming into operation of the sanctioned scheme or any provision thereof, the scheme or such provision shall be binding on the sick industrial company and the transferee company, or as the case may be, the other company and also on the shareholders, creditors and guarantors and employees of the said companies.' 8. relying on this provision, it is submitted that the scheme is binding to the creditors and guarantors and, therefore, it is binding to the excise department and the bank. it is submitted that thus the recovery and enforcement of bank guarantee are not permissible. it is to be noted that the scheme does not provide that the liability towards the excise department is extinct nor does it provide that the bank guarantee given for that purpose would not be enforceable. the only provision in that respect was that the waiver was to be considered. until the waiver is granted, the liability continues and can be enforced and there cannot be stay of enforcement of bank guarantee merely because some question is raised. in view of the aforesaid, this petition is dismissed.

Judgment:
ORDER

1. The petitioner-company challenges enforcement of the bank guarantee by the Excise Department. The bank guarantee is given under the orders of the Supreme Court and the petitioner has failed in the Supreme Court and, therefore, the bank guarantee has become enforceable.

2. The contention raised by the petitioner is that since the petitioner is a sick company and there is a scheme sanctioned under the Sick Industrial Companies (Special Provisions) Act, 1985, the coercive recovery of excise duty cannot be made except with the permission of the BIFR.

3. It is also submitted that under the sanction scheme, the concerned agency of the Government of India has agreed (inter alia) to waive the disputed excise duty liability of Rs. 4 lacs. Also to consider the withdrawal of the case pending against excise duty refund of Rs. 92 lacs with contingent interest of Rs. 166.15 lacs as on March 31, 1995 and waive the claim. Relying on this, it is submitted that the Excise Department has failed to consider the waiver of the claim and, therefore, the enforcement of the bank guarantee cannot be made.

4. It is submitted that the petitioner had filed a suit for refund of the payment of excise duty. The suit was decreed. In the High Court, the First Appeal filed by the Union of India and the excise authorities was allowed. However, during the pendency of the appeal, the department was made to deposit the amount and the petitioner-company was permitted to have that amount on furnishing the bank guarantee. In the High Court, the excise authorities had succeeded and the petitioner had carried the matter to the Supreme Court and it is stated that, under the orders of the Supreme Court, the bank guarantee has been continued. Now the Supreme Court has also dismissed the appeal of the petitioner and confirmed the judgment of the High Court and, therefore, the excise department is enforcing the bank guarantee to recover the amounts paid under the orders of the court and subject to the furnishing of bank guarantee.

5. The contention of the petitioner that since the petitioner is a sick unit working under a Scheme sanctioned the BIFR under the Sick Industrial Companies (Special Revisions) Act, this recovery cannot be enforced. It is to be noted that the recovery is being effected from the bank by enforcing the bank guarantee and, therefore, it cannot be said that enforcement of bank guarantee is in any manner stayed or prevented by the provisions of Section 22 of the SICA. The relationship between the Excise Department and the bank is separate from that of the petitioner-company and the liability of the bank cannot be said to have been stayed merely because the debtor company is a sick unit and is protected under the umbrella of Section 22 of the Act.

6. Under clause (xiv) of the scheme, until the Excise Department waives the claim, that liability is very much alive and enforceable and the enforcement of bank guarantee cannot be stayed on the ground that the question of waiver is not considered. The scheme was sanctioned on 16th October, 1996 and the judgment of the Supreme Court in the unjust enrichment case [Mafatlal Industries Ltd. v. Union of India, 1997 (89) E.L.T. 247] is delivered on 19th December, 1996. In view of the fact that the bank guarantee has been given in pursuance of an interim order of the Supreme Court and that the parties have to abide by the final orders of the Supreme Court, the Excise Department cannot be now prevented from enforcing the bank guarantee, which has been executed in pursuance of the orders of the Supreme Court and is being enforced in terms of the Supreme Court orders.

7. The learned Counsel for the petitioner has also drawn our attention to the mandate of provisions of Section 18(8) of the SICA, which reads as follows :-

'(8) On and from the date of the coming into operation of the sanctioned scheme or any provision thereof, the scheme or such provision shall be binding on the sick industrial company and the transferee company, or as the case may be, the other company and also on the shareholders, creditors and guarantors and employees of the said companies.'

8. Relying on this provision, it is submitted that the scheme is binding to the creditors and guarantors and, therefore, it is binding to the Excise Department and the bank. It is submitted that thus the recovery and enforcement of bank guarantee are not permissible. It is to be noted that the scheme does not provide that the liability towards the Excise Department is extinct nor does it provide that the bank guarantee given for that purpose would not be enforceable. The only provision in that respect was that the waiver was to be considered. Until the waiver is granted, the liability continues and can be enforced and there cannot be stay of enforcement of bank guarantee merely because some question is raised. In view of the aforesaid, this petition is dismissed.